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2 New Capital Resources Remarkable Opportunity A Unique Advance Funding Model Providing Capital Resources & Stability Foundation for Healthcare Expense.

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Presentation on theme: "2 New Capital Resources Remarkable Opportunity A Unique Advance Funding Model Providing Capital Resources & Stability Foundation for Healthcare Expense."— Presentation transcript:

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2 2 New Capital Resources Remarkable Opportunity A Unique Advance Funding Model Providing Capital Resources & Stability Foundation for Healthcare Expense & Risk Trend Reversal

3 3 OGR Advanced Funding Model - History Advance Funding Model Developed first in 1990s as risk management program Included a funding transaction Main purpose at that time: 1.Quantify a companys future health care liability and financial risks 2.Pre-fund such liability for a 36 month term 3.Convert volatile and unknown variable future costs into a current fixed cost obligation

4 4 OGR Advanced Funding Model - History Most Important to Today: Original Model has proven successful All maintained fully collateralized conditions None of original trusts have had to unwind Fast-Forward: Original architect Jeff Bemoras partners with PFR to expand on model and roll out the One Global Resources Model nationwide on large scale… PFR in-turn brings in ROI – Health Data Resources to ensure ALL Client data is collected and utilized to recover and conserve capital PFR brings in the missing link by partnering with LifeStrive ®, enabling TrendShift ® Data Directed Health Trend Management

5 5 Today OGR Advanced Funding Model - Today Fast-Forward Now Delivers Employers & Governments: Predictability / Monthly Identified Budget in a volatile cost environment Savings related to the liquidity and its strength in negotiation with Fixed Cost Providers. Long Term Claims Management, Risk Trend reversal and associated cost savings opportunity. Reserve build-up for future buy-down of Health Care exposure beyond the initial term. Prepayment of future liability that may help to insulate Bond and/or Credit Rating for client.

6 6 Cash Out Trust Agreement Trust All cash invested in accordance with established investment policy No cash disbursed for claim payments or administrative fees unless coverage ratio adequate Debt Service Claim Payments Administrative Fees Cash Proceeds From Loan Employer Monthly Remittance Payments Cash In Interest Income One Global Model-Cash Flow Flow of Funds Diagram Trust Certificates

7 7 Cash Flow-Fully Insured $133,563,648.M Employers Obligation Remittance = $3,816, Fixed for 36 Months Grantor Trust Issues Debt Trust Pays Principal & Interest FIXED Financing Rate 1.85% Gross Savings = $6,138, Net Savings=$4,802, Budgetability / Predictability Stability Negotiated Discounted Premium Identified Savings Day 1 Trust wires all funds to Carrier $133,563,648.M ESCROW Account Insurers Rate of Return 2.25% $4,544,459.00

8 8 Self Insured Case Example V = 85% FC = 15% R = Employers Obligation Remittance = $1.9M Fixed for 36 Months 95% Actuarial Confidence Level $78.1M FIXED Financing RateFIXED Investment Rate Budgetability / Predictability Arbitrage (Investment Opportunity) Balance Sheet implication-Footnoted on P & L Fully Collateralized Aaa Rated Grantor Trust P & I V FC Surplus = $6.9M Years 4-6 Tax-Free Rolling Reserve Investment Issues Debt ALL-IN 3 YEAR COST 1.85% 2.25%

9 9 Advanced Funding Elements Grantor Trust- Becomes the Obligor of the Debt, acts like a Single Purpose Entity established to isolate the client from financial risk. Escrow Agreement- Established in conjunction with Fully Insured Transactions Remittance Agreement- Clients Obligation under the Trust are simply to remit once a month for 36 months... Independent Trustee- established to manage disbursement of funds, and monitor sufficiency and investment criteria. e.g. Joint Powers Authority, Wells Fargo Bank etc. 101% Cash Collateralized Equity to Debt Position -Trust is security for the Note. Funds inside the trust are always over cash collateralized.

10 10 Employers Perspective Employer Advantages Provides Longer Term Predictability 3 years of Fixed Premiums Establishes an Identified Long-term Budget Generates Cash Flow opportunities- Investment Arbitrage Establishes longer term focus on Cost Reduction, through Audit Profiles, and Data Directed Health Trend Management OPEB-GASB Implications - Reduces Possible ARC Payments - Improvements in Bond ratings

11 11 Carrier Perspective Advantages for the Carrier 3 years premium funded in advance, day one - Fully Insured 3 year membership lockdown, per customer Increased persistency rates provide stability to block Eliminate marketing costs on renewals for 3 years Solidify relationships with broker/ consultants Marketing opportunity to gain significant new membership Reduced Actuarial and Underwriting Costs associated with constantly having to Re-Up the client

12 12 Data Needs Data Requirement All office locations SIC code 3 years premium history for medical/Rx (past 3 renewals) Census including: gender, DOB, coverage level Summary plan designs for last 3 years Indication of any major population shifts Projected trend for the next year Any large claims in excess of $20K

13 13 The Process Steps in the Process - Gathering Data (Phase 1) Compilation three years of claims data -Analysis and Assessment of Claims data (Phase 1) Evaluating growth/trend - Formal Presentation (Phase 1) Presentation of the Funding Model and findings - Evaluation of current data and Final presentation to client (Phase 2) Taking into account all outstanding variables and current information - Funding Process & Implementation (Phase 3) Matching clients requirements with Funding and Investment criteria - On Going Evaluation and reporting (Phase 3) Healthcare Report card, analytics and sufficiency testing

14 14 Final Agreements Phase Process - Phase 1 Gathering Data This Phase allows us to collect data, evaluate claims and report back to the client - Phase 2 Final Presentation This Phase allows us to update information, pull together any outstanding variables and present to the client prior to funding - Phase 3 Funding This Phase allows our specialists to take the program to the financial markets for funding and implementation


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